Author: Joel Schofer, MD, MBA, CPE
Finance Friday Articles
Here are this week’s articles:
- 4 Great Ways to Protect Your Real Estate Assets
- Don’t Buy Stuff You Can’t Afford
- Going Soft
- How to Get Rich Faster
- Long-Term Real Estate Returns
- Marginal Tax Rate or Effective Tax Rate?
- My Favorite Investment Writing of 2020
- Next Year Foretold
- Radiology and the Private Equity Bait and Switch
- Split the Difference
- Top 5 Reasons to Exceed 25 Years of Expenses Before Retiring
- Why Early Retirees Should Max Out Retirement Accounts
Throwback Thursday Classic Post – TSP Fund Deep Dive – The Lifecycle Funds – Hitting the Easy Button
Target date funds are popular. You just pick the approximate year you want to retire, and you invest in the fund that has a year close to that in its name. Nothing could be easier!
Let’s take a look at the Thrift Savings Plan’s (TSP) target date funds – the Lifecycle Funds or L Funds.
Inception Date
1 AUG 2005
Fund Management
The L Funds are invested in the five individual TSP funds based on professionally determined asset allocations.
Investment Strategy
To provide professionally diversified portfolios based on various time horizons, using the G, F, C, S, and I Funds. The objective is to strike an optimal balance between the expected risk and return associated with each fund.
The L Funds’ strategy is to invest in an appropriate mix of the G, F, C, S, and I Funds for a particular time horizon, or target retirement date. The investment mix of each L Fund becomes more conservative as its target date approaches.
The strategy assumes that:
- The greater the number of years you have until retirement, the more willing and able you are to tolerate risk (fluctuation) in your TSP account value to pursue higher rates of return.
- For a given risk level and time horizon, there is an optimal mix of the G, F, C, S, and I Funds that provides the highest expected return.
Each quarter, the L Funds’ target asset allocations change, moving towards a less risky mix of investments as the target date approaches. So if you are invested in one of the L Funds, you will notice that as you get closer to your target date, your allocation to the riskier TSP funds will get smaller while your allocation to the more conservative G Fund gets larger.
The rate of change in the target asset allocation is small when the L Fund target dates are in the distant future. The rate increases as the funds approach their target dates.
When an L Fund has reached its target date, it will be rolled into the L Income Fund. The L Income Fund:
- Is the most conservative of the L Funds.
- Focuses on capital preservation while providing a small exposure to the TSP’s riskier assets (C, S, and I Funds) in order to reduce inflation’s effect on your purchasing power.
- Is designed to produce current income for participants who plan to start withdrawing from their TSP accounts in the near future and for those who are already receiving monthly payments from their accounts.
- Has a set asset allocation that does not change over time.
- The progression from a target date L Fund to the L Income Fund is automatic.
New Lifecycle funds will be added for distant target dates as they are needed.
What is the Risk?
Investors in the L Funds are exposed to all of the types of risk to which the individual TSP funds are exposed. Your account is not guaranteed against loss. The L Funds can have periods of gain and loss, just as the individual TSP funds do.
What is the Benefit?
The L Funds simplify fund selection, and investment risk is reduced through diversification among the five individual TSP funds. You choose the fund that is closest to your target date (or, if your target date falls between the target dates that are offered, you can split your account between the two target date funds closest to your time horizon).
When you invest in the L Funds:
- You can be sure that your TSP account is broadly diversified.
- You don’t have to remember to adjust your investment mix as your target date approaches – it’s done for you.
If you want to see the historical performance of the five L Funds or a visual representation of how the asset allocations change over time, go to this page and click on the funds you want to examine. Here you can see I clicked the L 2030, 2035, and 2040:
Types of Earnings
The L Funds earn the weighted average of the earnings of the underlying G, F, C, S, and I Funds calculated in proportion to their L Fund allocation.
Expenses
The net expenses paid by investors is ridiculously low and is a major benefit of the TSP.
How Should I Use the L Funds in my TSP Account?
Use the L Funds if you are looking for a simple, low maintenance way of investing money in your TSP account. The L Funds make the investing process easy for you because you do not have to figure out how to diversify your account or how and when to rebalance.
The L Funds are designed so that 100% of your TSP account can be invested in the single L Fund that most closely matches your time horizon (or in the two L Funds closest to your time horizon). Any other use of the L Funds may result in a greater amount of risk in your portfolio than is necessary in order to achieve the same expected rate of return.
Determine the date when, after leaving Federal service, you will need the money that is in your TSP account. Then identify the L Fund that most closely matches your target date.
Advice from One of My Favorite Short Investing Books
Here is what one of my favorite investing books, The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns (Little Books. Big Profits)
Target-date funds can be an excellent choice, not only for investors who are just getting started with their investment programs, but also for investors who decide to adopt a simple strategy for funding their retirement.
SG’s Message – The Power of One Navy Medicine – A Timeless Strength
Esteemed Navy Medicine Shipmates:
National Pearl Harbor Remembrance Day is a time to give pause and reflect on the attack that – to this day – still represents the greatest tragedy and loss of life ever to befall the Navy.
Seventy-nine years ago, the battleships that had so magnificently represented the might and prestige of the Navy’s Pacific Fleet were destroyed or left too crippled to be of any immediate use. And onboard those ships were young and dedicated Sailors and Marines who would fall victim in that surprise attack.
As we reflect and remember our heroes of the past, there is a connection to what we do today – Navy Medicine steams to assist, serving admirably on the frontlines while projecting Medical Power.
People
The attack on Pearl Harbor left 2,403 military personnel and civilians dead. The loss of life was greatest aboard the battleship USS Arizona. Forty-nine percent of those killed in the attack (1,177) were crewmembers of this ship. This included a physician, a dentist and 15 hospital corpsmen. The battleship Oklahoma lost 429 crewmembers in the attack including a dentist and five hospital corpsmen.
On the day of the attack, Navy Medicine was represented by active-duty physicians, nurses, dentists, hospital corpsmen, pharmacy-warrant officers, and medical administrators ably assisted by Red Cross nurses.
Platforms
Naval Hospital Pearl Harbor was one of the best equipped and staffed of the 21 Navy MTFs in operation in 1941. Due to the concentration of naval personnel in Hawaii, additional medical support was provided by USS Solace (AH-5), which lay anchor off “Battleship Row” at Ford Island and Naval Mobile Hospital #2, which was under construction at the time of the attack. The USS Argonne was used as a clearing station to take care of casualties evacuated from ships or rescued from the water. Other platforms like the Naval Air Station and the repair ship USS Vestal operated as casualty receiving stations.
Performance
At 0815 that morning, hospital corpsmen-led rescue parties loaded onto small boats to locate survivors from the damaged ships.
Corpsmen from the Solace boarded small boats and steamed into the wreckage of the Arizona. They braved an inferno as they retrieved several wounded sailors. In the days after the attack, many of these same corpsmen had the grim task of searching for and retrieving the remains of service personnel in the harbor.
Within the first three hours after the attack, Naval Hospital Pearl Harbor received 546 casualties and 313 dead. By the end of the day, the hospital had a patient census of 960 casualties.
The hospital ship Solace received 132 patients (over 70 percent of casualties were burn cases), and Mobile Hospital# 2 received 110 casualties.
Medical personnel aboard all of our platforms worked around the clock treating 2nd and 3rd-degree burns, shock as well as shrapnel and machinegun wounds, lacerations, and compound fractures.
At the naval hospital, a team comprised of a pharmacy-warrant officer, a dentist, and pathologist were tasked with identifying the seemingly unending flow of bodies, most without identification tags and many unable to be identified through fingerprints.
Power
Despite the enormity of the challenges they faced, Navy Medicine personnel performed superbly at Pearl Harbor. Several were later awarded Navy Crosses, Silver Stars and commendations for their efforts. Among them was:
Pharmacist Mate Second Class Ned Curtis of USS Nevada (BB-36) who braved the enemy bombing and strafing attacks to attend to a wounded officer. Curtis transported the officer to safety while incurring severe burns that required extended hospitalization. For his efforts Curtis later received the Navy Cross.
LCDR Hugh Alexander, the senior dentist aboard the USS Oklahoma. As a result of damage caused in the attack, the Oklahoma capsized entrapping Alexander and others in a compartment where portholes provided the only possible means of escape. Despite his knowledge of the desperate situation in which he was placed and with complete disregard for his own safety, Alexander heroically went about the crowded compartment and deliberately selected the more slender of those entrapped and aided them in their escape through these narrow openings. Continuing his intrepid action until the end, Lieutenant Commander Alexander gallantly laid down his life in order that his shipmates might live. Alexander was posthumously awarded the Silver Star in 2018.
I encourage you to take time today to remember our fellow medical warriors who served with honor and distinction at Pearl Harbor. Reflect upon their sacrifices and their contribution to Navy Medicine’s hard won heritage of excellence. A heritage YOU contribute to every day by virtue of your selfless dedication and commitment to high reliability healthcare. Just as we salute our predecessors, those who follow us will salute OUR resolve and success in the face of the present adversity. We are the ONE NAVY MEDICINE team, linked not only arm in arm to overcome our current challenges, but across time with those whose inspiring example has shown us the way ahead.
SG Sends
Bruce L. Gillingham, MD, CPE, FAOA
RADM, MC, USN
Surgeon General, U.S. Navy
Chief, Bureau of Medicine and Surgery
Naval Medical Force Development Center (NMFDC) Monthly Newsletter
This is the newsletter that provides updates on the KSAs (here’s my post on What are KSAs?) and Navy Medicine Readiness Criteria:
Leadership Lessons of a New CO
In 2015 I unexpectedly went from being the Deputy Commander of a Joint Medical Group to being a Commander and JTF Surgeon. Here is an article I wrote then that I still believe in:
I came to JTF GTMO on September 25th as the Deputy Commander of the Joint Medical Group (JMG), but in November I was named the permanent Commander due to a policy change. Leading the JMG for the last 7 months has been an amazing experience. Here are the top leadership lessons I learned as a first-time CO:
When making decisions, consider fairness above all other factors. You’ll never keep everyone happy, so you need to make sure your decisions follow policy and are fair. You should be able to explain the rationale behind your decisions to anyone that wants or needs to know why you made them. If you can’t, you need to re-evaluate those decisions.
The overwhelming majority of your people are competent, so empower them to do their job. When people come to me with problems, my common response is, “Well what do you want to do?” Sometimes they are surprised to be asked this question, but you don’t fix problems in the front office. Your people are competent, smart, and creative, and the people on the front lines who are close to the problem are the ones most likely to come up with the best and most efficient solution.
You don’t need to know it all. Because I’ve never done the majority of the jobs in the JMG, I clearly don’t know it all. As a leader, you should never be afraid to admit that you don’t know. When you admit to your people that you don’t know something and that you rely on their knowledge and expertise, it doesn’t make you look uninformed. It reinforces to them the value they provide to both you as a leader and the mission of your unit.
Little things can mean a lot. As a senior leader, small things get magnified in their importance. Inconsequential comments now become policy setting statements. Troopers and sailors notice small details, like how your uniform looks. Finally, something as small as holding a monthly athletic competition can become a command-wide morale booster with lasting impact.
M&Ms can kill morale. No, not the candy. I’m talking about micromanagers and meetings. Read #2 above, realize your people are competent, and let them do their jobs without feeling micromanaged. In addition, by their very nature meetings are collective and, if unnecessary, they can collectively waste a ton of time. Twelve people having a non-productive meeting for 1 hour is 12 wasted hours. Only have meetings when they are necessary, and always respect your people by starting on time, sticking to a pre-established agenda, and avoiding them when they aren’t required.
NDAA 21 Conference Report Update – Special Pay Changes Were Included
The NDAA 21 conference report is here:
If you go to page 756 of the PDF, you’ll see a section titled, “SEC. 612. INCREASE IN SPECIAL AND INCENTIVE PAYS FOR OFFICERS IN HEALTH PROFESSIONS.” I’ve been getting a lot of questions about it, but I’m a little hesitant to comment, answer questions, or get too excited until we see if this gets signed and how it plays out. In addition, as you can read below, President Trump is threatening to veto it.
Here’s a link to a Military Times article about the NDAA conference report:
Fate of sweeping military personnel policies, family support plans rests on Trump’s veto threat
FY22 Promotion Boards – What are They Looking At and How Can You Get Ready?
Here are the Powerpoint slides:
Here is the screencast:
Pay Plan Update and Finance Friday Articles
The FY21 pay plan is currently still under review. Our best guess is that it is not signed until early 2021, but that is simply a guess.
As for questions about increases in board certified pay and other physician pays, that language was in NDAA 21 drafts. At this point, what the final NDAA says or when it gets signed is anyone’s guess.
Just to end on a positive note, you all look amazing today!
Here are this week’s articles:
Throwback Thursday Classic Post – Chapter 2 – Pathways to Becoming a Naval Physician
Note: The views expressed in this chapter are those of the author(s) and do not necessarily reflect the official policy or position of the Department of the Navy, Department of Defense, or the United States Government.
Special Thanks to Drs. Jami Peterson and Brett Chamberlin for their revisions of this chapter.
Introduction
The military has two programs that provide financial support for medical students and one that supports residents. The Health Professions Scholarship Program (HPSP) and Health Services Collegiate Program (HSCP) are used to attend a civilian medical school. The Financial Assistance Program (FAP) provides financial assistance to current residents. Each program provides various benefits in return for a contract serve as an active duty physician following completion of medical school or residency. Additionally, students accepted to the military’s medical school, the Uniformed Services University (USU) can earn their medical degree while serving on active duty. Alternatively, board certified physicians can apply to be a Direct Commission Officer (DCO) and begin service immediately upon commissioning.
Uniformed Services University (USU)
Established in 1972, USU trains future physicians in the unique aspects of military medicine while meeting all requirements for general medical licensure in the United States. Application to USU is through the American Medical College Application Service (AMCAS). In addition, applicants must also meet all requirements for active military service, including a medical screening examination and background security investigation prior to being unconditionally accepted into USU. Detailed information is available at https://www.usuhs.edu.
Each of the four uniformed services is represented at USU – Army, Navy, Air Force, and Public Health Service (PHS). While attending USU, Navy students are commissioned on active duty as an Ensign and receive military pay for that rank. All tuition, fees, medical supplies, and books are provided.
In addition to meeting all the requirements for medical education, a USU student is exposed to both life in the military and military medicine. Classes are given in military medical history, chemical and biological warfare, wound ballistics, deployment medicine, as well as many other military topics. At least two field exercises are conducted over the 4-year curriculum, giving the student a concentrated and intense introduction to medical support during simulated combat operations.
Following graduation, the new Navy physician is obligated to serve in the Navy for seven years in a non-training status following completion of the PGY1 (internship) year. Any commitment previously incurred through either the Reserve Officer Training Corps (ROTC) or any of the military academies is added to this obligated service and served consecutively.
Health Professions Scholarship Program (HPSP)
As a recipient of a HPSP scholarship, the military pays full tuition, all fees, reimbursement for required books and equipment, and a stipend of approximately $2300 per month. Participants get 45 days of active duty for training each year and are paid full entry-level officer pay and allowances during that time. At the present time, a signing bonus of $20,000 is offered. Time in the program does not count for retirement or pay purposes.
In exchange for financing the participant’s medical school education, an obligation to serve on active duty for the number of years of scholarship benefit or a minimum of three years (whichever is greater) is generated. HPSP eligibility requires that the applicant be a U.S. citizen (dual citizenship is not permitted), physically qualified for a commission in the military, and accepted into an accredited school in the U.S. or Puerto Rico. The minimum undergraduate GPA required is 3.2 and the minimum MCAT score is 500. Applicants must not have reached the age of 42 at the time of commissioning on active duty. Here is a link to the Navy HPSP website.
Periods in which officers are in a training status (such as internship, residency, or fellowship) do not count towards fulfillment of the military contract but count towards military retirement.
Health Services Collegiate Program (HSCP)
HSCP is very similar to HPSP, but with a different benefits package. Rather than commissioning into the Inactive Ready Reserve (IRR), students receive pay and benefits (including health insurance, basic allowance for housing, etc.). Medical school tuition is not reimbursed, however the time spent in HSCP does count towards the 20-year requirement for retirement eligibility. This pathway is most often used by prior enlisted students with families who attend a relatively inexpensive medical school, although having previously served is not a program requirement.
Financial Assistance Program (FAP)
FAP is similar in concept to HPSP, with the exception that it applies to residency. Individuals can apply once they have been accepted to an accredited US residency program. The only caveat is that the types of residencies for which scholarships are offered may vary. Not all residencies and specialties will have a recruiting goal, so it is possible that the Navy does not offer the FAP scholarship to applicants in certain specialties.
Officer Preparedness Training
All medical officers attend 4 to 6 weeks of “Officer Development School” (ODS) located in Newport, Rhode Island. For USU students, this occurs prior to the first year of medical school. For HPSP students, this can occur at any time prior to graduation or immediately upon graduation. These courses are designed to give the new medical officer an orientation to military life as well as military customs and courtesies.
Graduate Medical Education
The typical pathways to residency training in the military are inservice programs at military treatment facilities (MTFs) or deferment and outservice programs that are completed at civilian residency training programs. For any given specialty, a graduate medical selection board is convened either in late November or early December to determine the program selection and the number of years of training for every applicant. Selection board results are normally published in mid-December.
Inservice Residency Training Programs at Military Treatment Facilities
Various Army, Navy, and Air Force MTFs around the country sponsor inservice residency training programs. They are all fully accredited by the Accreditation Council for Graduate Medical Education (ACGME). While in a dedicated post-graduate training program (internship, residency, or fellowship), payback towards the initial service obligation is on “hold.” The service commitment resumes upon graduation from training. Inservice training counts toward retirement, but generally incurs additional obligated service time that may be served concurrently with medical school and undergraduate educational obligations.
Navy Active Duty Delay for Specialist (NADDS) Programs for Residency Training Programs in Civilian Institutions
Some graduating medical students are selected for deferment for their entire residency, called the Navy Active Duty Delay for Specialist (NADDS) program. This means that the student can match as a civilian intern/resident and complete his/her training in a civilian program. Upon such completion, he/she then enters or returns to military service as a civilian residency-trained physician. In some cases, a similar deferment of service obligation is permitted for Medical Corps officers who are already in the process of completing or have completed an internship, called Release from Active Duty to NADDS or “RAD to NADDS.”
Other graduating students are, however, granted only a one-year deferment to complete an internship in a civilian program. They are then expected to serve in general medical practice as General Medical Officers (GMOs), Flight Surgeons, or Undersea/Diving Medical Officers (UMOs/DMOs) for 1-3 years before applying for further in-service, out-service, or deferred training. Once completing this tour, they can apply for residency training through the military or finish their military obligation in this role and separate from the Navy.
Application to this program follows the normal civilian “match” guidelines after approval from the Navy. Using the NADDS route to post-graduate training incurs no further obligation but it does not count toward payback for the initial obligation. USU students are now eligible for deferment training programs.
Full-Time Outservice (FTOS) Programs for Residency Training at Civilian Programs
Full-time outservice (FTOS) training allows Medical Corps officers already on active duty the opportunity to train at a civilian institution while remaining on full-time active duty status. Unlike members in a deferment program, FTOS trainees continue to draw their military pay. In addition, like inservice training, time served in FTOS training counts toward retirement.
The number of FTOS training slots awarded each year varies depending on the particular need for residency or fellowship trained specialists. Graduating medical students are generally not eligible for FTOS training.
Summary of Graduate Medical Education Options
As detailed above, there are many different options available for GME. The following chart summarizes the programs available to the different programs:
| Program/Status |
Inservice GME |
NADDS | FTOS |
RAD to NADDS |
| HPSP/HSCP |
Eligible |
Eligible | Not eligible |
Not eligible |
| USU student |
Eligible |
Eligible but rare | Not eligible |
Not eligible |
| GMO/UMO/Flight Surgeon |
Eligible |
Not eligible | Eligible |
Eligible but rare |
Unique Opportunities in Military Medicine
The military offers unique opportunities not normally available in civilian medical practice and training. There is the opportunity to practice medicine in a variety of geographic locations spanning the globe. Military physicians can readily take part in both combat and humanitarian medical missions. In addition, the military offers unique training for physicians in undersea/hyperbaric, flight, tactical and wilderness medicine and other non-traditional fields. The practice environment is vastly different from civilian medicine, with near universal healthcare coverage of the patients you treat as well as significant protections of the individual physician from malpractice and litigation. Finally, there is a significant financial benefit and security to be gained from a military retirement pension with an automatic annual cost-of-living adjustment.
Joel Schofer's Career Planning Blog 